DJI: Winning in consumer drones
DJI Overview: from hobbyist to billion-dollar business
When Frank Wang incorporated DJI (Da Jiang Innovations) Co in his dorm room in 2006, the market for unmanned aerial vehicles (commonly known as drones) was limited to a few die-hard hobbyist and research institutions. DJI began by selling component to a few research universities and drone hobbyists around the world.
As the DIY drones market moved from single-rotor to quadcopter designs, Wang began to develop flight control functions, GPS systems and video stabilization gimbals, and marketed them to a small audience in specialty trade shows and UAV enthusiast message board.
In 2012, DJI launched its flagship product Phantom, and it was the first ready-to-fly, preassembled drone on the market. Phantom quickly became the best-selling product. The ease of use helped Phantom to find a following beyond dedicated UAV enthusiasts, and market DJI’s steady march towards dominance in consumer drone market. The drone maker has steadily move toward bigger market with its subsequent Mavic and Spark series. By 2018, DJI accounts for 72% of the total drone sales.
Key decisions contributed to DJI’s success: With Phantom, it produced a superior product by integrating modular components. It innovated around technology to fulfill customers’ needs, and it continued to reinvent itself by introducing new products and optimized internal resources and processes to a product focused strategy.
Becoming leader in the consumer drone market
Since its first Phantom launch, DJI has positioned its product to serve the needs of the aerial photography and videography market. Its product evolution, innovation process and pricing were all tightly integrated around the concept of a “flying camera”.
Wang positioned the company as a “global leader in aerial influence”. The company’s goal was to allow customers to take stunning footages from the air with a high-quality, easy to use product. Once Wang realized the potential for aerial imaging, he pivoted from single-rotor helicopter to quadcopter technology and began developing gimbals which could fix and stabilize cameras attached to drones. From 2012 onward, DJI has focused on innovation around key technologies that enable better image quality: Quadcopter flight control, gimbal for camera stabilization, and transmission of video and photographs in real time.
Disruptive technology in aerial imaging
Before commercially available drones, aerial imaging was limited to military and profession crew manning large fixed-wing UAVs or helicopters. Phantom and other products offered by Parrot and 3D robotics allowed footages to be taken at a much lower costs of a store-bought drone, resulting in a disruption in the aerial imaging market.
Technology also unlocked the demand for drones by making them much easier to pilot and use. The need to manually control early drone models created a high barrier to adoption and hence non-consumption. The modern drone comes with collision detection and automatic flight control system, making it vastly more accessible to people without extensive drone flying experience.
Since DJI launched its Phantom, the company has been on a sustaining path to introduce features that help to “take better videos”. Phantom series steadily improve the image resolution, flight time and ease of use.
From the outset, Wang wanted DJI to make professional grade drones at a reasonable price acceptable to most people, whereas other players saw the space as “attaching camera to a toy drone”. Retailing for $679 when it first launched, Phantom was more expensive than offerings from DJI’s rivals such as Parrot and other Chinese drone manufacturers. However, because its value proposition for aerial imaging was so compelling, many customers are willing to pay the premium features of the Phantom.
Expansion: moving into mass consumer market
Following the success of Phantom, DJI has moved steadily towards serving a bigger market. This involved designing features around new customer needs.
On area of innovation is around drone weight. Unlike drone enthusiasts, mass market consumers priced portability over performance and customization. Mavic, DJI’s next series released in 2016, was designed to be foldable and light, catering to casual drone enthusiasts. DJI also introduced Spark in 2018, which weighed just 300g and could easily fit into a small backpack.
Instead of panoramas or footages of natural scenery, Mavic was designed with the selfie crowd in mind. DJI introduced the “gesture mode”, which let users take selfie without been seen holding the camera. The drone was also able to track and circle around a person, taking aerial selfie images perfect for social media sharing.
Organization: aligning resources around innovation
Unlike its competitors, DJI established its own manufacturing facilities to produce the drones. Shenzhen is at the heart of Chinese manufacturing, which enabled DJI to respond quickly to ramp-up in demand. The low cost of labour also helped the drone manufacturer to retain competitive pricing, even with high-performance features added to its drones.
The in-house manufacturing capability can support the rapid pace of product launch. When changes to specifications are made during product meetings, engineers could produce prototypes within hours.
DJI poured its resources into building the world’s largest research and development team. With 800 employees and 25% of its engineering staff devoted to R&D efforts, DJI became the leader in patent applications on drone related technology.
The company was able to establish its dominant position through rapid product cycle, typically launching 1 to 2 new products every single year. To promote bottom-up innovation, DJI allowed any staff from product development team to lead initiatives if their proposals can withstand the extensive interview and scrutiny from the product development committee.
Student comments on DJI: Winning in consumer drones
Truly an amazing story where the technology, product and supply chain lined up perfectly. I wonder what’s next for DJI as they tapped out the consumer market and drone is a product that consumers tend to hang on to for many years given its high quality and premium price, rather than replace / upgrade like iPhone every 1-2 years. In light of the recent pilot that Amazon launched with FedEx and Walgreens, what role do you see DJI could play in the commercial space? As that market potentially could be much bigger if where a commercial drones fleet and the replenish cycle will be somewhat predictable.
Interesting read! I think another big question the Company will inevitably have to consider as it scales is around regulation. I am just thinking about the examples of airports shutting down due to flying drones. As with many disruptive technologies, once you reach significant scale, a superior product itself might not be enough anymore to sustain yourself (an extreme case would be Juul). In particular because drones are leveraging a public good (i.e. air space), they might have to be prepared for stricter regulations around when and where drones can be flown, which could impact their growth trajectory.
learned a lot from the reading.
I am wondering how could DJI facing the potential competition from other technology companies? There are some companies which already started to copy DJI’s products. What’s the specific value that DJI can offer to consumers, which are hard to be copied? How can they keep their competitive advantage to keep leading the industry?
Great piece. It will be interesting to see how DJI’s product offering and focus evolves over time. My guess is that there will be downward pressure on prices of recreational drone as the technology becomes commoditized and with the entrance of new competitors. However, the use of drones for industrial/business applications keeps increasing. Sectors like agriculture, oil & gas, movies, etc. are now heavily dependent on drones. I wonder if DJI will double down on the development of more sophisticated drones for these types of applications.
A mention of the iPhone in one of the comments above got me thinking if the next step for DJI would be to create a platform of sorts like the AppStore providing a variety of software services and applications. It’s definitely not as general-purpose as the iPhone and AppStore which might mean that DJI provides the applications itself rather than building a platform for independent developers but software and applications could become the next step for the company.
Drones have always been an interesting market to me. It appears DJI initially was more focused on high end drones that appeal to a very particular, tech savvy segment. I bet if the professor asked how many people in class owned a drone above $100, very few would raise their hands. My hunch is that the push toward simpler, modular drones that can integrate with social networking is a strategic play to open up the general consumer market. This is basically a high end selfie stick. I’d be very interested if this strategic approach makes them a winner in the consumer space. I also am curious how easy it is to get patent protection in this field given the competition.
Amazing article. After the class discussion, I felt that there is an opportunity for DJI to focus on more use cases beyond photography and videos. I believe that DJI can leverage these use cases to not only improve the technology but also diversify the revenues of the business.